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Home » Analysis and reports » Uganda’s unending oil tax disputes: will URA survive another Total Disaster

Uganda’s unending oil tax disputes: will URA survive another Total Disaster

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Oil Tax Disputes The tax dispute between Total E&P Uganda is just another in a series of Tax Disputes that the Uganda Revenue Authority has had to deal with in the past 5 years. The good news is that so far Uganda’s Tax body has always come out victorious and most remarkably in the Heritage case in which Uganda Tax Appeals Tribunal held that URA was entitled to the $434 Million in capital gains tax from Heritage Oil upon the sale of its assets to Tullow Oil worth $1.45 Billion. This came after Tullow exercised its option to purchase the assets in which they already had a 50% stake. Heritage’s appeal against the decision was dismissed by the London Court of Arbitration.

Later Tullow got into a tax dispute with the URA as well over the partial sale of the same assets, transferred to the China National Off Shore Oil Company (CNOOC)  and Total E&P Uganda at the valued cost of 2.9 billion. Ideally the government sought a $407 million capital tax levy on the sale but Tullow reasoned that the Minister of Finance, Planning and Economic Development then had given the company an exemption.

However the government on the premise of Article 152 of the of Uganda’s Constitution successfully argued in the Tax Appeal Tribunal that since all taxes levied must be creations of given statutes, so must the exemptions. Tullow Oil has since appealed against the decision and the country awaits the outcome.

Now most recently, Total E&P Uganda filed a request for arbitration before the International Center for Settlement of Investment Disputes pertaining to URA’s imposition of stamp duty on the acquisition of Total’s interest in Exploration Area 2.

Though Total has not disclosed how much tax is at the heart of this dispute or why it objects to the tax levy,  it is speculated that the tax dispute is worth over $30 million which is about 89 Billion Uganda Shillings. That’s only a paltry sum when compared to the Tullow and the Heritage tax disputes where taxes worthy Trillions of Uganda Shillings were disputed.

Yet this dispute should not be taken for granted because Ushs 89 billion is almost 1/5 of Ushs 440 Billion allocated to the Agricultural Sector in the 2014/15 National Budget. The sector that employs the biggest number of Ugandans.

And whereas Uganda has won the previous cases like earlier highlighted, it has come to a point where the tax disputes could be eating into the precious time so desired for the country to  progress to the production stage of its oil resources let alone the resources that the country has to sink into the pursuit of these cases.

Besides, the cases that Uganda has to deal with at the moment, the Tullow Appeal and the Total case are lodged in the London Court of International Arbitration and and the International Centre for Settlement of Investment Disputes (ICSID) respectively. ICSID is an arm of the World Bank that facilitates resolution of international disagreements among investors

These being international entities they are inclined to make considerations in favour of Multinational Corporate entities like the two companies as opposed to advancing the interests of individual states like Uganda.

Our only hope as a country therefore remains in URA fronting lawyers that will stand up to the occasion and save the nation from losing the trillions of shillings that are at stake.

[author image=”http://ugandaoil.co/wp-content/uploads/2014/12/Zakaria-Tiberindwa.jpg” ]Zakaria Tiberindwa is a Writer, Researcher and Legal Professional. He obtained a Bachelors Degree in Law from Uganda Christian University and has completed his Post Graduate Diploma in Legal Practice at Law Development Centre. He has more than 5- years experience in journalism and creative writing. He has skills in writing, journalism, research, legal aid practice, web design, web-content management, social media marketing, public speaking, training, print magazine-designing, editing, photography and video-shooting and editing. He is a performance poet and has been an active member of Uganda’s largest community of Poets, the Lantern meet of Poets. He blogs at the wireless connection and  [follow id=”@musumbazak” ][/author]

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